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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






2. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






3. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






4. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






5. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






6. Ed < 1






7. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






8. Occurs when LRAC is constant over a variety of plant sizes






9. Entry of new firms shifts the cost curves for all firms upward






10. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






11. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






12. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






13. The output where ATC is minimized and economic profit is zero






14. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






15. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






16. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






17. Ed > 1 - meaning consumers are price sensitive






18. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






19. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






20. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






21. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






22. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






23. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






24. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






25. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






26. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






27. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






28. The price of a good measured in units of currency






29. The difference between total revenue and total explicit and implicit costs






30. The most desirable alternative given up as the result of a decision






31. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






32. The total quantity - or total output of a good produced at each quantity of labor employed






33. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






34. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






35. The rational decision maker chooses an action if MB = MC






36. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






37. Exists if a producer can produce a good at lower opportunity cost than all other producers






38. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






39. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






40. Product demand - productivity - prices of other resources - and complementary resources






41. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






42. Ei = (%dQd good X)/(%d Income)






43. The difference between total revenue and total explicit costs






44. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






45. The practice of selling essentially the same good to different groups of consumers at different prices






46. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






47. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






48. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






49. The imbalance between limited productive resources and unlimited human wants






50. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment